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Martin Zimmerman says that when a Loblaws opened at Queen St. W. and Portland St. two years ago, business at his Freshmart in Kensington Market dropped 25 per cent overnight.

So, of course, he is concerned that Loblaw Companies Ltd. will be opening another store, much closer — on College St., west of Spadina Ave., on the second floor of a 15-storey condo development.

“Kensington Market is all about personality. People come because they feel welcome, they feel part of the community,” said Zimmerman.

He is concerned that a Loblaw could put family-owned grocers out of business, and Kensington Market could become the next Entertainment District, with bars and restaurants setting up shop where food retailers have operated for generations.

The Loblaw store is going in despite complaints from residents and a petition by Friends of Kensington Market that has more than 7,000 signatures. The dispute highlights the problems retailers are facing as they try to shoehorn stores into dense urban neighbourhoods instead of building from scratch in growing suburbs.

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Sometimes, it’s an easy sell, like the Longo’s store at the foot of a condo in Maple Leaf Square near the Rogers Centre. In other cases, there is more opposition – as when Loblaw converted the cherished Maple Leaf Gardens into a grocery store.

But in both cases, the old style of property development — pick a store template and build it from the ground up — wasn’t an option.

“Downtown Vancouver and Toronto are key markets for people looking to do things differently. It’s not the suburbs, it’s a totally different way of doing business,” said Thomas Barlow, president and chief executive officer of the Canadian Federation of Independent Grocers.

Grocers in urban markets with unique stores tend to have smaller spaces, so they can’t afford to make mistakes when it comes to stocking the shelves. The labour profile is different — some urban stores operate 24-7 and are busy throughout the week, at lunch and at supper. They may not have the same weekend pattern as suburban stores.

Dense urban markets also tend to have more cultural diversity, said Barlow.

“You’ve got to be sharp. You’ve got to really understand the consumer.”

Retailers setting up shop in existing neighbourhoods also have to deal with increasing community activism, Barlow said.

“Local community groups are very passionate about what’s coming into their market and what’s not coming into their market.”

Walmart is another retailer facing opposition in urban markets. News that the big-box retailer was considering a store in Kensington Market was greeted by protest.

But Walmart has been working with smaller, unique store sizes for years.

The store at Gerrard Square, a renovated Zellers which opened in Oct. 2012, is a smaller footprint than would be expected in a Walmart store. The Stockyards store was built with parking at grade and underneath the store to take advantage of a smaller site.

Walmart Urban 90 stores, at 90,000 square feet, are half the size of a typical Walmart Supercentre, but a new supercentre in Stratford is 88,000 square feet. It offers fresh groceries, including an in-store bakery and hot counter.

After analyzing census and demographic data, Walmart opened British and German sections within the store and are catering to a stronger-than-typical market for organic and gluten-free products.

“As we continue to grow our operations, with a focus on bringing supercentres to communities across Canada, it’s important for us to take advantage of new opportunities as they become available,” according to Walmart spokeswoman Rosalyn Carneiro.

In the U.S., Target is working with smaller CityTargets, which, like the Zellers boxes they took over here in Canada, are sometimes unique in size and shape.

Kevin Groh, vice-president, corporate affairs for Loblaw Cos. Ltd. said the Kensington Market area Loblaws will be unique, smaller-than-usual, and creative.

“In terms of the environment, 297 College will be about one-seventh the size of our largest stores, a quarter the size of Maple Leaf Gardens, and half the size of our Queen West store. It will be one of our smallest footprints, it will have no surface-level parking and will be at the base of a residential building. This is a true urban adaption and a natural fit,” he wrote in an e-mail response to questions from the Star.

“Urban residents are demanding urban options. You can’t just consider this in the context of a local pocket of very unique retail. You have to consider it in the context of a large, bustling trade area with major transit routes, University students and residences, urban-professionals living locally, and so much more.”

Not all merchants in Kensington are worried.

Arja Chopra of Sugar and Spice says Loblaws sells a lot of what she sells — natural organic health foods and supplements.

“Personally I am not worried about it. Their prices are always so much higher than mine.”

Wanda’s Pie in the Sky owner David Beaver says Loblaw will sell cheaper pies, but they won’t be selling home-made pies.

“There will be some benefits,” said Beaver, pointing out that there are some Kensington Market businesses that perhaps need competition to improve their game.

“There’s a lot of people not keeping up.”

The irony is that Zimmerman’s Freshmart is affiliated with Loblaw and sells President’s Choice products. Ten years ago, when he partnered with the grocery giant, there were concerns that it would wipe out competitors.

But Kensington Market is still standing.

The good news for retailers who need great swaths of real estate is that although Toronto’s downtown condo boom attracts a lot of attention, the Toronto region is growing five times faster at its suburban edges, according to a study by David Gordon, a professor and director of the School of Urban and Regional Planning at Queen's University.

Which means, Gordon says, that for now at least, Canada remains a suburban nation.

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